Buying a Business in Costa Rica
Many people looking at real estate in Costa Rica often also look to purchase or start a business. Starting or buying a business in Costa Rica can be a daunting task, both have their up and down sides.
If you’re interested in purchasing an existing starting a new business in Costa Rica, this article will give you important information on processes, permits and licenses and other requirements you may need for buying or starting a business in Costa Rica.
There can be many advantages to starting or purchasing a business in Costa Rica. First it is a very foreigner friendly country with long established democratic rules policies and procedures, and most important the rules are the same for foreigners as they are for locals.
Another point is that often a product or service that is developed and successful in North America is not yet available here. In general most cases, buying or starting a business in Costa Rica is less costly than the North American market.
In terms of purchasing an existing business the first decision is whether to buy the corporation’s stock or just the assets. Watch out for hidden liabilities if you buy the stock and take over the corporation business, there may be liabilities not on the “corporate” books which could jeopardize your investment.
By buying only the assets of the corporation and not the corporation itself you may be more able to protect yourself. The Costa Rica commercial code shows the steps and procedure for purchasing assets of a business, including tangible as well as things like copyrights, trademarks and clients lists.
In regards to getting permits and licenses, buying an existing business has obvious advantages by bypassing all the bureaucratic red tape and processes that are time consuming and often frustrating when starting and forming a new business.
Existing businesses also short cut a great deal of start time in terms of entering the market and subsequent barriers as they have established themselves already, in most cases. Make sure to research any governing bodies or related organizations that may be able to help you from the onset of your venture.
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Make sure to carefully review the following information sources when buying a business in Costa Rica:
Public Corporate Records – have your corporate law attorney carefully check articles of incorporation, bylaws, type and amount of capital stock, and powers of attorney.
Private Corporate Records – Check current stock ownership, and stockholder and any resolutions not on public record.
Accounting Records – Have a certified accountant check these records investigate the actual income and expenses, fixed and liquid assets, short-and long-term liabilities and taxes.
Tax Obligations – Have certified accountant check these records including yearly income, sales, corporate stamp, property taxes, monthly sales taxes, and travel and hotel lodging taxes, road taxes and commercial license fees, municipal services such.
Permits and Licenses (Municipal and National) – Every business needs the health department permit and a municipal business licenses. As well as special permits which may include beers, wines, and liquors; permit for late hours functioning; registration with the Tourism Board for lodging tax, etc.
Employment Records – Check written contracts specifying employment and employee particulars with responsibilities and salaries, along with up-to-date social security and worker’s compensation insurance payments, mandatory vacation, Christmas bonus, and severance pays.
Property/Real Estate Title – Check for the presence of liens, encumbrances, mortgages, and judicial claims, details such as measurements on the property title should agree with the actual measurements on site.
Lease Contracts – Confirm all names on the contract, conditions for use of the property, and the rental payments and potential legal increases, as well as any other terms and conditions. Confirm with a lawyer any terms or special conditions for transfer of names.
Customer Satisfaction – Although not a legal obligation, check customer complaints and customer satisfaction can yield important information for going forward with your business.
Create your checklist before any signed agreements and before any money changes hands. Make sure you have a qualified legal representation, accountant, and expert available regarding human resources for Costa Rica. A mentor or consultant is highly recommended for those that are new to Costa Rica before buying a business.